The media has had a lot of fun with the UK’s bookmakers recently. They have been blamed for locating shops in areas that exploit the poor; horse racing has complained bookmakers are not paying enough; the government wants to tax the punter at the point of consumption; and B2 (FOBTs) machines come in for endless criticism. The onslaught has been relentless.
With all this anti-bookmaker sentiment around readers would be forgiven for believing that the bookmakers have never had it so good, making vast profits off the backs of ordinary punters and they richly deserve the kicking they were getting.
The truth is somewhat different, as the table below demonstrates.
If trading is difficult for the big firms what do you think it is like for the rest of the industry where fixed costs relative to revenue are higher. For the smaller bookmaker the situation is even worse.
The industry is faced with a rising tide of costs. Bookmakers are exempt from VAT so every invoice costs 20% more than if they were any other VAT registered business.
During those good years of 2006 and 2007 businesses were suckered into believing that Chancellor Gordon Brown had abolished boom and bust. It was during those good times that executives paid too much to buy peace. They paid too much because the financial community wanted certainty. The cost of certainty has been paid through the profit and loss account.